In a groundbreaking move, Flare has unveiled a governance proposal that seeks to revolutionize the way maximal extractable value (MEV) is captured on its network. By integrating MEV capture at the protocol level, Flare aims to redirect the revenue generated from transaction ordering away from a select group of specialized actors and into its own token economy. This innovative approach would make Flare one of the first layer-1 blockchains to achieve this feat.
MEV refers to the revenue that block builders generate by reordering, inserting, or censoring transactions within a block. On most blockchain networks, this value is captured by external searchers and builders, who effectively impose a hidden tax on ordinary users through front-running, sandwich attacks, and arbitrage. According to external estimates, annual MEV revenues can reach tens of millions of dollars on networks like Arbitrum, upwards of $500 million on Ethereum, and as high as $1 billion on Solana. Flare's proposal outlines a three-stage process to capture and integrate MEV into its token economics.
The first stage involves transferring block building responsibilities from individual validators to a designated builder, initially operated by the Flare Entity, with a fallback to the current model if the builder becomes unavailable. The second stage moves block building into Flare Confidential Compute, making the process publicly auditable. The third and final stage merges the builder and proposer into a single entity, shifting the role of existing validators to a verification function.
The proposal also introduces FIRE, the Flare Income Reinvestment Entity, which will collect revenue from various protocol sources, including attestation fees, FAsset and Smart Account fees, confidential compute fees, and captured MEV. FIRE's primary objective is to reduce the supply of FLR tokens through open-market buybacks and burns. Several key changes would take effect immediately upon approval of the proposal. The annual inflation rate of FLR tokens would decrease to 3% from 5%, with the hard cap reduced to 3 billion tokens per year from 5 billion.
A significant 20-fold increase to the base gas fee, from 60 gwei to 1,200 gwei, is expected to raise the estimated annual FLR burn from approximately 7.5 million to 300 million at current transaction volumes. Despite this increase, the cost of a standard Flare transaction would remain a fraction of a cent. Flare's roots run deep in the XRP ecosystem, having distributed its initial token supply through an airdrop to XRP holders in 2023. Its FAssets system has produced over 150 million FXRP and is designed to bring smart contract functionality to assets on blockchains like XRPL that do not natively support it.
As of late March 2026, the network reports over $160 million in total value locked, with more than 887,000 active addresses, demonstrating the potential for significant growth and adoption.